Report: Government Close to Finalizing Restructuring of $2.6 Billion in Pension Funds

Ghana’s pension funds are nearing an agreement to restructure their holdings of $2.6 billion worth of government bonds, according to the Chamber of Corporate Trustees. Under the proposed plan, the pension funds would receive higher interest payments over an extended period of time. The government requested the trustees to exchange their existing securities, which carry an average coupon of 18.5%, for two new bonds maturing in 2027 and 2028 with an average interest rate of 8.4%. To compensate for the reduced interest rate, the government will offer additional securities issued in February and a cash-payment instrument with a 10% interest rate, resulting in a total stream of coupon payments equal to 21%. The aim of the proposal is to safeguard the value of the pension funds while meeting Ghana’s fiscal targets. Labor unions are also engaging in separate discussions with the government on the debt exchange. The exclusion of pension funds from the initial phase of the domestic debt exchange led to threats of a strike by labor unions concerned about potential losses. Ghana initiated the debt restructuring to qualify for a $3 billion International Monetary Fund program, and the first part of the domestic debt swap was concluded in February. The government is now working on reorganizing its eurobonds, finalizing the restructuring terms with bilateral creditors, and completing the remaining portion of the domestic debt exchange. The risk premium on Ghana’s dollar debt has decreased significantly, and the country aims to reduce its debt-to-GDP ratio to 55% by 2028. The pensions regulator will introduce forbearance measures to alleviate prudential requirements for the companies participating in the debt exchange, and the Financial Stability Fund will provide capital and liquidity support. Without these measures, a majority of the pension trustees would face capital problems and operational challenges due to the debt reorganization.